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Service Sector in the US Shows Highest Growth Rate and Recovers in Europe
Aug 5, 2003

The July non-manufacturing index of business activity was 65.1% according to the latest ISM REPORT ON BUSINESS. U.S. service sector grew for a fourth consecutive month in July and registered its highest ever level of activity since the index was produced in 1997. Also in July, new orders, order backlogs, employment, prices, and imports increased.

In turn, the NTC-Reuters index of service sector activity in Europe was 50.2, just over the breakeven level of 50. The recovery of the service sector in the Euro area from a 48.2 reading in June is welcomed after several months of contraction. In the UK, the CIPS-Reuters index of service sector activity continued to show fast growth after recording 56.6 in July, two percentage points up from the 54.5 level of activity registered in June.

Employment in the US service sector registered growth for a second month in a row, although growth rates continue to be weak. Yet this is an important trend after several months of growing unemployment.

The service industries reporting the highest rates of growth of business activity in July were Construction, Finance & Banking, Retail Trade, and Communication. The only service industry reporting contraction of business activity in July was Health Services.

Despite fast growth in the UK’s service sector in July, unemployment continued to increase. In fact, the July index of employment of 47.3 in the service sector showed a faster decrease in employment than in June.

Similarly, employment in the Eurozone service sector continued to fall at a steep rate in July, despite the improvements in business activity. The index in fact dropped slightly from 45.9 in June to 45.8, signaling a rate of decline only marginally less severe than the five-year survey record pace seen in January. Employment has now fallen for twelve consecutive months. All main countries surveyed reported a net loss of service sector jobs in July, with Germany again seeing by far the sharpest rate of contraction.

Business activity returned to growth in Italy and France from the contractions recorded in June. Italy recorded the strongest growth of all countries surveyed, albeit beating Ireland, France and Spain by only small margins. Germany continued to report falling activity, although the rate of decline slowed to the weakest seen since levels began to fall twelve months ago.

The U.S> non-manufacturing report is available from ISM, while the reports for the UK and Europe are available from NTC-Research.

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